The Nuts and Bolts of Going Offshore: Part 2 – Why Go Offshore?

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offshore bankingBy Peter Macfarlane

Every client has a slightly different motivation for going offshore. Frequently, asset protection may not be motivated by tax at all, although both are related: protecting your assets against depletion by taxation or inflation is every bit as important as protecting against attacks in court. Bottom line: If you dont feel comfortable with what your government is doing at home, if you dont trust the politicians not to steal your hard-earned assets… its just safer to be offshore!

Conservative banks that don’t need constant bailouts, strict statutory secrecy regulations supported by stiff criminal penalties for those who might breach them, blanket confidentiality provisions for trust and company management firms, zero information on public files such as credit bureaux, and the ease of opening multi-currency and precious metals accounts are only some of the reasons why your assets might be better protected offshore than onshore – even though you will declare the account to the tax authorities in your home country if you are required to do so.

Credit bureaux, in particular, have become a scourge on modern society. While they certainly serve a useful role by allowing people to qualify for credit if they want to, there is simply no way you can opt out of them if you are not interested in borrowing money.

This is plain immoral in my view. Despite unenforceable ‘privacy protection’ laws to the contrary, this means that basically anyone with internet access can check your bank balance at any time – sometimes with disastrous consequences. Unless, of course, you only use offshore accounts – which never report to anybody.

The Offshore Safe Haven

A lot of offshore investments used to come from countries where political turmoil and civil strife threatened the wealth of productive people. For example, Miami became a major regional financial centre because it offered the security, safety and stability of the United States of America to businessmen and wealthy families from Latin America at a time when the region was characterised by devaluations, government thefts and ruthless dictatorships who imprisoned people for victimless crimes.

Today, however, the tables are turned. Today we see lots of Americans and Europeans (besides those same wealthy Latin Americans) seeking a safe haven for their money outside the US and the European Union, as they see the economy imploding and the dollar losing its value. In a twist of irony, a lot of that Miami money is heading today the other way to ‘safe havens’ like Panama, Nevis, Uruguay or the Cayman Islands.

Smart money doesnt want to depend on the economy of just one country or indeed one currency. Small offshore havens – neutral countries with very conservative economies – are able to offer the necessary safety and security. For example, no Swiss bank has collapsed ever in history, ever! Whereas since 2007, according to bankimplode.com, nearly 600 onshore banking institutions have collapsed and counting… most of them in the USA.

We’re not saying that you will lose money in major western banks today either. To take the example of the USA, even though it is well known that the FDIC does not have adequate reserves to cover a major bank failure like Citigroup or Bank of America, the government would likely bail out the depositors.

But therein lies the problem as well as the solution. Having the same bank balance before and after your bank collapses doesn’t help you if that balance is then worth less. Every time the Fed or the ECB fire up the printing press, the dollar and the euro are worth less. That is why you need to hold a diversified currency portfolio including precious metals. And that, dear reader, you can do much better offshore.

NOTE: We’ve updated the Practical International Banking Guide this year, to reflect the fast pace of change in the offshore banking world. We’ve included new contacts and removed and/or updated some old ones.

Remember that old information can be out of date and dangerous. That’s why it’s important to keep an eye on our blog and Q Bytes email newsletters, as well as catching up on the more meaty topics that are presented in the Members-only area of our website.

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